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(Topic ID: 199230)

Got an offer to sell my route.... How much is it worth?


By Okarcades

2 years ago



Topic Stats

  • 76 posts
  • 45 Pinsiders participating
  • Latest reply 2 years ago by LTG
  • Topic is favorited by 7 Pinsiders

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    There are 76 posts in this topic. You are on page 2 of 2.
    #51 2 years ago
    Quoted from ASOA:

    Industry standard is 1 and a half times earnings.

    I know for me part of the confusion is the use of terms, which may not be consistent with accounting terminology and seems to vary from poster to poster. For example, is earnings gross revenue after split or is it EBITDA or earnings after ITDA or something else? I understand the $900 figure appears to be revenue after split but I find it interesting that the valuation of what is essentially a utility or REIT is based on revenue as opposed to a metric that is closer to the actual profit valuation of the locked in contracts. (In my opinion, a route is more like a utility or a REIT than a tech company. You have contracts to deliver a service for a given period at given margins. There is limited growth within the market (the two locations). Additional growth comes from market expansion, which is not substantially aided by the current market share. Beyond some potential 'back office' efficiency and expertise, you really don't have much advantage over someone else with three games they want to route). I know for me, I would need to know a lot more about the financials than just the gross revenue.

    I do find the discussion interesting, even though I have ZERO interest in owning a route. I also applaud the OP for operating a route as it helps the health of the Pinball Industry overall. To me, it looks like lots of headaches and frustration for not much coin.

    3 weeks later
    #52 2 years ago

    so what ended up happening?

    #53 2 years ago

    So if you spend 46,000, after 5 years you'd have 54,000 in earnings + 30k in machines or $84k

    If you just spent that in the stock market taking the last 5 years as a benchmark, you'd have 46,000 * 90% gain (with dividends reinvested) = $87,400

    Plus the stock earnings are taxed less, no work, etc.

    #54 2 years ago
    Quoted from taylor34:

    So if you spend 46,000, after 5 years you'd have 54,000 in earnings + 30k in machines or $84k
    If you just spent that in the stock market taking the last 5 years as a benchmark, you'd have 46,000 * 90% gain (with dividends reinvested) = $87,400
    Plus the stock earnings are taxed less, no work, etc.

    Past performance is not an indicator of future returns. It's good to invest of course but the market could turn at any time.

    #55 2 years ago

    Mitchell has a barcade?!

    #56 2 years ago

    If I was buying from you,

    I would ask to de-couple the sale of the machine.

    I only want your location.

    You may pull your machines, sell them separately.

    I drop my machines in.

    For me, the real cash flow is based on Money-in-the-room less the depreciation, less wear & tear maintenance costs, travel costs.

    So, say $800 per month (pre-taxes)

    Using 8% interest rate, the present value of the $800 a month over 5 years is $39,454.74

    But, it is much easier to leave my money in the stock market, then do the work of operating a route, plus all the risk over 5 years
    (location goes bankrupt, machines are damaged, playfield glass is broken, game is stolen, cost of insurance, building fire, node board failures, ...)

    My offer, based on a one-year payback would be $9,600 for the location only.

    Good luck with the sale.

    #57 2 years ago

    I wish I could sell my business based on gross earnings. Seems like what was trying to be done here. I don’t see much mention of the time and expense spent trying to actually collect that gross figure of $900/mo. In actuality, once you spend your time, your gas and any other expenses, I would expect NET earnings to be WAAAY less (if not negative). This is the main reason I think so many people take such issue with asking for $20k as an indicator of future “earnings”. If I had to hire a tech to manage this route for me, I don’t know if I’d ever make the $20k back. Why does “hiring” myself have any less value?

    #58 2 years ago

    I find this discussion very interesting. I understand the concept of selling the machines for market value, since you could dissolve the Routes, sell the machines and move on. But I'm struggling with the future earnings component---why would the buyer agree to pay any future earnings---wouldn't it mean he wouldn't make any $$$ for the length of the earnings agreement?

    #59 2 years ago

    In my business I have come across a similar situation, but as the buyer. I organize Business English training for companies in Germany and sometimes school owners who want to quit offer to "sell" me their clients. That means they will personally introduce me to their contact and recommend me. I also commit to take on the trainers they have been employing. So for the sake of comparison let's say the trainers are the pinball machines and the income they generate is the coin take.

    The school owners always initially want a deal like the one the thread starter suggested, which is based on a future projection of past earnings. However, a number of things can go bad. If business slows down, training is a benefit that is often dropped. Or the client agrees in principle to the deal, but then hires the trainer directly and cuts me out. Etc, etc, etc.

    Basically a price based on future earnings in a business lilke mine poses an unacceptable risk for me. Therefore, whatever price we agree on is always paid in installments and only as long as the clients I have "bought" generate income. I usually do pay 20% of gros earnings for the first year and from then on 10% until the agreed amount is paid off.

    In my business it's very easy to show how much income a client generated and the seller could easily check whether I was lying if I claimed training had been stopped and he didn't believe me. I have no idea how that is in the coin-op trade.

    #60 2 years ago
    Quoted from captainadam_21:

    Mitchell has a barcade?!

    Bonus Round in Sioux Falls

    #61 2 years ago

    I decided not to sell. I figured I would keep the route and the income and make sure the public has games in great shape to play. Better for me and the pinball community.

    I'm focusing more on flipping house now.

    #62 2 years ago
    Quoted from Okarcades:

    I decided not to sell. I figured I would keep the route and the income and make sure the public has games in great shape to play. Better for me and the pinball community.
    I'm focusing more on flipping house now.

    Did you ever get an offer or did you decide not to sell before it progressed that far?

    #63 2 years ago

    I decided not to sell. I figured I might as well keep holding the games and continue to take the profit. When the time comes, I may just pull the games and sell them. For now not really sure.

    #64 2 years ago
    Quoted from jwilson:

    Past performance is not an indicator of future returns. It's good to invest of course but the market could turn at any time.

    So could the route, lol. Yes, I understand the stock market isn't guaranteed results, but how is a route any safer? If anything, stocks are the safer of the two.

    #65 2 years ago
    Quoted from pickleric:

    Bonus Round in Sioux Falls

    Ahhh... Great place. Needs to be bigger so there is room for more pins though

    #66 2 years ago
    Quoted from taylor34:

    So could the route, lol. Yes, I understand the stock market isn't guaranteed results, but how is a route any safer

    I haven't check recently - did people stop drinking beer?!

    You tried to point out the stock market was better in a 5-year situation but it's a false equivalence. Why not the fives years from 2005-2010? I bet those returns aren't so good.

    #67 2 years ago
    Quoted from Okarcades:

    I decided not to sell. I figured I might as well keep holding the games and continue to take the profit. When the time comes, I may just pull the games and sell them. For now not really sure.

    I must admit that I'm relieved for a selfish reason. Your Star Trek thread showing the wear after all of the plays is one of my favorites threads. It't pretty obvious from that thread that you do a great job as an operator and take pride in what you do. I say keep doing it as long as you love it.

    #68 2 years ago
    Quoted from Ericc123:

    I must admit that I'm relieved for a selfish reason. Your Star Trek thread showing the wear after all of the plays is one of my favorites threads. It't pretty obvious from that thread that you do a great job as an operator and take pride in what you do. I say keep doing it as long as you love it.

    My sentiments exactly...I just now became aware that this was the same route as those threads...glad you decided to keep your route as they are my two favorite threads in Pinside.

    #69 2 years ago
    Quoted from jwilson:

    I haven't check recently - did people stop drinking beer?!
    You tried to point out the stock market was better in a 5-year situation but it's a false equivalence. Why not the fives years from 2005-2010? I bet those returns aren't so good.

    I bet those years were not so good on route either, lol. If they were, people would have routing more games (which they weren't during that time).

    I'm just saying that with all the risk and work, you're at best only slightly better off than if you bought stocks after 5 years. Now if it was strictly passive where you didn't have to do anything, then it might be worth it. Having to constantly work on games and collect money isn't passive though.

    #70 2 years ago
    Quoted from taylor34:

    I bet those years were not so good on route either, lol. If they were, people would have routing more games (which they weren't during that time).
    I'm just saying that with all the risk and work, you're at best only slightly better off than if you bought stocks after 5 years. Now if it was strictly passive where you didn't have to do anything, then it might be worth it. Having to constantly work on games and collect money isn't passive though.

    I am all for stocks but the hobbiest in me thinks that his route is more admirable and definitely contributes to spreading the love of that which we call Pinball.

    #71 2 years ago

    In the business world yea I get future earnings, that would imply that there is some sort if contract with a cash amount of profit,
    but what's to stop someone from just buying several new games and start up there own business, getting there own locations?
    2 locations doesn't sound that great to me, and if your only making 900 a month, and you expect them to pay you future earnings,
    where's the profit for the new owner? where is the incentive?
    Sound like a losing venture to me.

    #72 2 years ago
    Quoted from wdennie:

    In the business world yea I get future earnings, that would imply that there is some sort if contract with a cash amount of profit,
    but what's to stop someone from just buying several new games and start up there own business, getting there own locations?
    2 locations doesn't sound that great to me, and if your only making 900 a month, and you expect them to pay you future earnings,
    where's the profit for the new owner? where is the incentive?
    Sound like a losing venture to me.

    In the first post he tells us that he was approached to sell the route by a potential buyer. Why would he sell his two locations for no profit...i.e. Future earnings?

    #73 2 years ago
    Quoted from jwilson:

    I haven't check recently - did people stop drinking beer?!

    No, but people are very fickle, Check the failure rates for bars and restaurants. One week a place is 'THE place to be' a month later no one wants to be seen there'

    (That, having been said, I do agree with you that it's easy to cherry pick a five year period in order to prove one's point, regardless of what it is one is trying to prove)

    #74 2 years ago
    Quoted from wdennie:

    In the business world yea I get future earnings, that would imply that there is some sort if contract with a cash amount of profit,
    but what's to stop someone from just buying several new games and start up there own business, getting there own locations?
    2 locations doesn't sound that great to me, and if your only making 900 a month, and you expect them to pay you future earnings,
    where's the profit for the new owner? where is the incentive?
    Sound like a losing venture to me.

    I was kind of thinking that someone wanted his business just to get one of or both of those locations.. Not actually after his business, just the locations. Kind of like...How much for your games and you go away...Type thing. it was just a thought.

    It's power play over the actual 900 bucks. Or maybe just a person that wants a hobby thing. Just a game. I don't care what it cost, I want it type thing....

    6 months later
    #75 2 years ago

    I have been a major sized operator, distributor and well know manufacturer. My going rate to buy and I have purchased 8 routes is to pay 50 times the operators share, including games. I would want a guarantee that the location would be in business for a certain length of time. Say 35 weeks or I get a refund of some type. Now that number includes juke boxes which are worth more and some other type of games. Right now in 2018 most operators are not as interested in pinball as they have been.
    If I were the gentleman who wants to sell, I would search within a 20 mile radius of his house and look for more locations. The operation of coin op games is a great business. Ever see an operator go bankrupt?

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